The Insolvency and Bankruptcy Code, 2015: A Gamechanger for Ease of Doing Business and Growth of Bond Market?
| Published date | 01 April 2016 |
| Date | 01 April 2016 |
| DOI | http://doi.org/10.1177/0019556120160209 |
| Subject Matter | Article |
NOTEl
THE
INSOLVENCY AND BANKRUPTCY CODE, 2015:
A GAMECHANGER
FOR
EASE
OF
DOING BUSINESS
AND
GROWTH
OF
BOND MARKET?
BIJAYKUMAR
THE INSOLVENCY and Bankruptcy Code, 2015, that had been presented
in the last winter session
of
Parliament has been considered to be a major
financial sector reforms. The bill has been referred
to
a Joint Committee
of
the Parliament which provides opportunity to discuss its provisions
threadbare.
A new legal bankruptcy framework which helps improve handling
of
conflicts between creditors and debtors, avoid destruction
of
value, distinguish
malfeasance vis-a-vis business failure and clearly allocate losses in macro-
economic downturns has been a long-felt need. In the present context
of
ease
of
doing business and growth
of
Indian bond market, the Insolvency
and Bankruptcy Code, 2015, assumes special significance. Bankruptcy Law
Refonns Committee (BLRC) has carried out in-depth study
of
the subject
and had extensive consultations with stakeholders before finalising its report;
which is highly appreciated.
It
is
encouraging to see that the new code has
been received we]] by the stakeholders at the initial stage. However, there are
certain aspects which may unfold
in
due course and, therefore, need attention
as elaborated below.
1. Reversal
in
Priority
of
Payment I Waterfall
of
Liquidation-
BLRC
has recommended that priority
of
workers' dues be
sub-classified according to period
of
pendency assigning lower
priority to dues which are older than 12 months vis-a-vis dues
of
unsecured creditors. This recommendation marks a major
departure from
the
corresponding recommendation
of
the
Advisory Group on Bankruptcy
Law
headed
by
Dr.
L. N. Mitra.
It is important to note that the Waterfall prescribed by Sections
529-A
and 530
of
Indian Companies Act, 1956, stood amended
in favour
of
workers
by
the provisions
of
Sections 326 and 327
of
the Indian Companies Act, 2013. This pro-workers trend is
proposed to be reversed by inserting sub Section 7 to the Section
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